Elite economists seen yellow lights on the Sandleris plane – 12/11/2018



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Picante was the closing panel of an international conference in which yesterday spoke about the prospects of inflation in Argentina and in which the president of the Central Bank participated, Guido Sandleris. They exposed Miguel Kiguel (moderator) with him, Guillermo Calvo (Columbia University, New York), José Darío Uribe (former president of the Central Bank of Colombia) and Augusto De la Torre (Former president of the Central Bank of Ecuador and chief economist of the World Bank for the region).

From the first minute the momentum of the conversation was raised: Calvo, De la Torre and Uribe talking about experiences and recommendations (when asked by Kiguel). "Counter-attack" by Sandleris. "The weekend I was camping with my daughter. Every parent had a formula to reduce inflation and stabilize the dollar. Each has its recipe and it explains to you", He responded after the first round of intervention from his panel colleagues.

Calvo looked at that moment. Minutes before he had said about the money and exchange program. "It will be an experience to seethere is little scientific evidence of what Argentina is doing. "Then he added:" Policies that use monetary aggregates [N.E.: se refirió al control del crecimiento de la base monetaria] they tend to be more recessiveOn the other hand, those who anchor the exchange rate bring some summer. "The Latin American Financial Affairs Commission recommended yesterday that the exchange rate be updated to 1% a month from April to accelerate disinflation and lower the rate of interest.

De la Torre also "charged" the monetary policy in the previous one. Relativized the effectiveness of the control of "aggregates" to reduce inflation, at least of the levels registered by Argentina during a decade. And he emphasized another problem: salary. The Ecuadorian recalled that people establish wages and prices taking into account past inflation. And to reverse this phenomenon, a "change in the structure of expectations" must occur. He called it "the policy to disarm these behaviors."

Uribe, for his part, explained that Colombia took almost ten years to empty its economy. "Persevere not shake hands," was his recommendation. "Everyone has an economist inside"he said. The BCRA president reinforced Uribe's decision to share his balance over the weekend.

Sandleris was emphatic about the direction of monetary policy. "The main objective of this central bank is that Argentina can live with one-digit inflation rates. This is not something that is achieved from one day to the next, we have to persevere." He emphasized that "the context requires that the Central Bank be very cautious"

The conference was organized by UTDT, CLAF and Banco Ciudad.

Finally, Calvo warned that Argentina faces a reversal of capital flows from developing to developed countries, "a process that has not yet ended." This means that the economy needs to adjust, including wages in dollars. "They have to fall more in real terms"he said. "The problem is the public wage: try to be indexed".

Calvo sees the danger of inflation spreading as a result of this, because in that way he would lose the currency advantage after the devaluation. "We have to be careful because the exchange rate will return, especially if the pressure on the state continues." He mentioned the case of Israel in the eighties. "The current situation can be complicated, but not because of monetary policy, but because of the real sector," he said, taking responsibility before the Central Bank. "Israel has made agreements with the trade unions. Country risk is a political risk. complicate"

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